Anatomy of Success: Green Mountain Coffee (GMCR) - Anatomy of Success
May 20 2013 - 5:38AM
Zacks
They say 'luck' is simply about being prepared for an opportunity.
In the stock market, when a positive earnings surprise sends a
stock exploding higher, those that were properly positioned are
often called lucky for being in.
To a degree, they are right. How much a stock moves after such
an event depends on a lot of things.
But purposefully being in a stock with a high probability of
positively surprising is a lot more science that luck. And much of
it comes down to their ability to surprise in the past along with
their earnings estimate revisions.
Green Mountain Coffee Roasters (GMCR)
Those in Green Mountain Coffee, a specialty coffee maker, were
setting themselves up to get very 'lucky'.
On November 30th, 2012, GMCR was upgraded to a Zacks Rank #1
(Strong Buy), which forecast that they would outperform the market
over the next 1-3 months. At that time, they were trading at $36.67
with their projected 12 Month Earnings Estimates at $2.73.
Investors who got in on that Strong Buy signal saw the price of
GMCR start to climb immediately. And week by week, their earnings
estimate revisions steadily climbed as well. Each increase in
earnings estimates provided more and more reason for the stock to
continue its uptrend.
On Feb. 6th, 2013, GMCR posted a positive surprise of 15.38%.
Prices didn't immediately explode higher after that beat, but with
estimates continuing to go up, prices quickly followed suit,
gaining another 28% between then and their next earnings
report.
Leading up to that report, investors were quite confident that
even better things were in store for GMCR. With earnings estimates
still on the rise, and knowing that companies that positively
surprise have a greater tendency to surprise again, it's no wonder
investors were excited.
On May 8th, that excitement was well founded as they posted
another positive surprise, this time 27.40%, and prices skyrocketed
27.84% in one day. All in all, between 11/30/12, when they first
earned their Zacks #1 Rank, and the close of business on 5/17/13 (6
½ months later and still a Zacks Rank #1), GMCR increased by
117.10%. Wow!
Stocks receiving upward earnings estimate revisions typically
receive even more upward earnings estimate revisions. And stocks
receiving upward earnings estimate revisions have a higher
probability of positively surprising. This virtuous cycle continues
as stocks that positively surprise have a tendency of positively
surprising again.
Very few things can send a price skyrocketing like a positive
EPS surprise. But you don't have to wait to get lucky on one of
these stocks. You can create your own luck by keying in on stocks
with a Zacks Rank #1, upward earnings estimate revisions, and a
recent history of positive EPS surprises.
Click here to see more Zacks Rank #1 stocks
Disclosure: Performance information for Zacks’ portfolios and
strategies are available at:
http://www.zacks.com/performance.
GREEN MTN COFFE (GMCR): Free Stock Analysis Report
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